Rally, Reality

Macro

Last week played out in two clean phases. Phase one was the ceasefire rally: the S&P strung together seven consecutive up days into Friday, vol compressed with the VIX dipping below 20 for the first time since early March, and Brent fell as low as $96 as traders priced in Hormuz reopening.

Phase two started over the weekend. VP Vance flew home from Islamabad without a deal. The nuclear question was the sticking point, alongside Iranian demands for Hormuz control, war reparations, and access to frozen assets, all rejected outright. Trump responded with a full naval blockade on Iranian ports. Brent surged 8% back above $103 on Monday, erasing the prior week's oil decline in a single session.

Thursday's CPI was ugly on the surface but the market largely shrugged it off. Headline rose 0.9% MoM to 3.3% YoY, with gasoline's 21.2% monthly surge accounting for nearly three quarters of the move.Core came in at 0.2% MoM and 2.6% YoY, both a tick below expectations, which is why equities didn't flinch. The read is that this was a concentrated energy shock, not broad-based inflation. That's fair for March. But energy costs take time to feed through to transport, food, and services, and with the ceasefire now dead and Hormuz still effectively closed, April and May prints will be more telling on whether this stays contained or starts broadening out. Markets are pricing zero rate moves for 2026, first full cut not expected until 2027.What’s interesting is that despite all of this, markets aren't panicking. Asia was down overnight but nothing dramatic. Nasdaq futures are holding. Each new headline produces a smaller reaction, which either means the market has priced the worst case or it's getting complacent. Probably somewhere in between.

Outside of geopolitics, the underlying concerns haven't gone away. The labor market is still soft, AI capex sustainability questions unresolved, private capital crunch still playing out. The interesting dynamic over the next couple of weeks is the US earnings season. Not because Q1 numbers will be transformative, but because mind share rotates back to bottom-up analysis instead of pure macro headline trading. That shift in attention alone could introduce some volatility.

Digital Assets

BTC finished the week up 2.6%, sixth on the cross-asset leaderboard. Crypto participated in the risk-on move but didn't lead it. Understandably, given BTC had already held up relatively well through the worst of the volatility, so there was less ground to recover.

The range continues to tighten. BTC has traded $65k-$73k for over two months, with the more recent band narrowing to $68k-$73k. This morning BTC is around $71k, down about 2.7% on the blockade news but holding above $70k. In March, every escalation headline sent BTC sharply lower in lockstep with equities. Now BTC is taking hits and holding its levels in a way it wasn't six weeks ago.

The liquidation heatmap tells a clear story. Two months of range trading has built dense clusters on both sides, but the distribution is asymmetric. Significant short liquidation density is stacked above price, particularly through the $70s. Below, the picture is thinner, some liquidity around $60-63k but far less concentrated. Open interest has been climbing while funding rates oscillate between positive and negative. A move up squeezes through concentrated shorts into potentially a new range. The downside path encounters sparser resistance.

On flows, BTC spot ETFs pulled in $22.3 million in net inflows last week. Positive, but not the kind of number that signals a change in institutional appetite. ETH continues to bleed with YTD fund outflows at $327 million, with the CLARITY Act overhang keeping institutional money on the sidelines for staked products.

Derivatives are reflecting the coil. Perp OI stabilized in the $28-30 billion range. Funding briefly turned positive mid-week before flipping back toward neutral on Monday's blockade. On the option side we’re seeing dealer gamma exposure through the $68k-$72k range means hedging activity amplifies moves in either direction through those strikes. That's a setup that rewards a catalyst over continued chop.

Our take:

“The macro so far hasn’t broken the BTC range yet. It feels like all the pieces including macro, the AI trade and crypto regulation will come into play to decide direction soon…"

The ceasefire trade is dead. The Islamabad collapse removed the most concrete de-escalation framework the market had to anchor on. We're back to an escalatory posture with Iran's IRGC calling the blockade "piracy" and warning that no Gulf ports are safe.That said, the diminishing reaction function is real.

Outside macro, we’re keeping a close eye on the range. Positioning has anchored to it on both sides but the breakout has more mechanical fuel to the upside than the downside. Calling the catalyst is a different exercise.

A confirmed Hormuz reopening breaks the mid-70s for BTC. Continued escalation keeps us range-bound with downside drift. Earnings season rotating attention back to fundamentals doesn't resolve the macro overhang, but after seven weeks of pure geopolitical headline trading, even a partial shift in what the market is paying attention to could change how positioning behaves at the edges of this range.